The securities and exchange commission (SEC) has issued a warning to investors against fear of missing out (FOMO) as hopes of a BTC ETF approval rise.
FOMO is the feeling you get when you feel like something is happening that you could miss out on, such as limited movie tickets etc. The commission in a blog post tagged “NO GO to FOMO” warned that FOMOing in investment is the worst decision investors can make.
“We’ve all seen the increased interest in online investing and the explosion of digital assets and meme stocks. Understanding these kinds of investments may seem overwhelming. Digital assets include crypto-currencies, coins and tokens like those offered in initial coin offerings (ICOs). Meme stocks may be based on internet popularity and social views, instead of a traditional stock value, such as a company’s performance,” the agency wrote.
“And, let’s not forget about NFTs (non-fungible tokens). An NFT has a unique code that allows it to be identified as something that can be digitally-owned. It’s found on a blockchain, which is a kind of digital ledger. Think of NFTs as digital ownership of something like art work, sports memorabilia, photos, etc,” it added.
Keeping Volatility in Mind
Volatility is the rapid change in the price of investment assets. This is particularly prominent in the crypto industry where the market is still young. One asset can gain massively now and the next minute lose it all.
The SEC said investing in assets simply based on trends and the opinion of influencers is a FOMO attitude that must be discarded, adding that it “isn’t the best way to plan for a strong financial future.”
“And as we have seen, many trendy investments can experience a lot of volatility. We’ve seen high highs and low lows. These kinds of investments may be appealing at first, but once the novelty wears off some investors may decide to move on to something else, which may cause the investment to take a significant downturn. How would you feel if your investment lost 20, 30, or even 50 percent in a single day?”
The blog post also encouraged investors to diversify their investments during market swings in order to stay protected from volatility. This diversity can also be within a single asset class.
“It’s also important to diversify within an asset class, such as not putting all of your money in one or two stocks. Instead, spread it across different industry sectors. That way, if you want to dabble in a “cutting edge” [crypto] investment that may experience a lot of volatility, you might be better protected against a downturn. Our phrase, “NO GO to FOMO” even applies to trying to time the market. It’s time in the market that counts, not timing the market,” the agency stressed.
The ETF Hype
The crypto industry is eagerly awaiting the approval of at least one Bitcoin spot ETF in the United States. This is expected to happen within the week as the deadline for decision on some of the applications is near.
Analysts have also shown a lot of optimism that there will be an approval this time around because this is the closest that Bitcoin has been to getting such an approval. The SEC may be concerned that more mainstream investors may be interested in BTC, hence the warning against FOMO.
